What happened
Shares of U.K.-based digital payments processor Paysafe (PSFE 1.70%) jumped 7.2% through 11:33 a.m. EST after the company reported Q3 earnings on Thursday.
Analysts expected Paysafe to post $353 million in sales for the quarter, but earn no profit. Paysafe beat these expectations, though, generating revenue of $366 million, and earning...no profit.
NYSE: PSFE
Key Data Points
So what
That may not sound like great news for Paysafe, but today it seems to be good enough for investors (especially in light of today's positive inflation news -- inflation down to 7.7% in October). Meanwhile, at Paysafe, payment volumes grew 5% year over year and revenues were up 4% (and would have been up 10% but for unfavorable currency exchange rates).
As for profit, while it's true they rounded to zero dollars and zero cents per share, in fact Paysafe did earn $1 million in total profits -- a big improvement over last year's $147.2 million net loss. CEO Bruce Lowthers pronounced himself "pleased" with this result, and it seems Paysafe's shareholders agree with that.
Now what
Still, the quarter seems a bit lackluster to me, given the weak numbers. Guidance, too, was unimpressive. Looking ahead, Paysafe raised its revenue guidance slightly, to roughly $1.49 billion in revenue for the full year -- but that's really only flat against last year's revenues, which hardly seems the thing of which 7% stock price rallies are usually made of.
Paysafe promised no profits for 2022 under generally accepted accounting principles (GAAP), either -- only $407 million or so worth of "adjusted" earnings before interest, taxes, depreciation, and amortization (EBITDA). Perhaps most telling of all, though, is that Paysafe plans to hold a reverse stock split -- 12 existing shares getting compacted down to one new share -- in December. The effect of this will be to lift Paysafe's apparent stock price into the $15 range. But really, the best way for a company to grow its share price is by improving its earnings so as to attract more investor interest -- not by reverse-splitting its shares.
The fact that Paysafe has chosen to do the latter suggests management doesn't see much prospect for the former.
